Market Perspectives of Commercial Real Estate | Care Properties

Market Perspectives of Commercial Real Estate | Care Properties

13.10.2020 Author/s: Dr. Heike Piasecki

For the autumn report of the ZIA, we analyzed investments, office, logistics, hotel and care properties. Here you can read our summary on senior care properties - this market is systemically relevant not only in the crisis.

In the homes, the concern remains: 21.5% of Germany's population is older than 65 years and thus belongs to the risk group whose health impairment caused by a virus infection is higher than that of younger people. About 820,000 residents are cared for in about 10,000 nursing homes. The direct effects of the corona pandemic, which are currently being felt, present special challenges for the nursing homes. On the one hand, these are based on the strict implementation of hygiene measures to protect residents, employees and visitors. This requires special work processes for nursing care, but also the provision of disinfectants and protective clothing. Care bottlenecks due to sick employees can occur. On the other hand, the facilities for the protection of residents and employees have developed visit concepts in recent weeks. The successful introduction of these concepts has made it possible again to implement the urgently needed social contacts between residents and relatives.

Around 820,000 residents are cared for in German nursing homes. This number is set to rise in the coming years.

If necessary, there may be a reduction in the occupancy rate at the facilities in the short to medium term; this can be justified by a possible increase in the mortality rate of the residents and slower reoccupation of the nursing care places, an occupancy stop due to a lack of personnel or temporary overarching health policy restrictions. This decline in occupancy rates may lead to a loss of revenue and thus to a reduction in the ability to service costs. Parts of the losses are covered by the "COVID-19 Hospital Relief Act". However, the investment costs are not covered. Therefore it is in the interest of both the real estate owner and the operator to find solutions together, e.g. in the form of rent reductions. These secure the lease and thus the operation of the facility in the long term. Insolvencies of small operators that are not economically stable can nevertheless not be ruled out in the medium term.

In assisted living as well as in home care by relatives and outpatient services, the effects of the corona pandemic can be seen above all in the daily care and support of people.

Secure investments, but declining returns in the market for care properties

The current recessive market phase, which is a consequence of the corona pandemic, is strengthening a growing demand for defensive and non-cyclical real estate investments. Investors are particularly positive about the sustainable cash flow generated in senior citizens' real estate. This is based on a demographically secured demand for care places and offers for senior apartments. This is also reflected in the current transaction activity. According to an analysis by CBRE, the transaction volume in the first half of 2020 was around EUR 888 million. The nursing home segment accounted for around EUR 553 million of this figure, while EUR 228 million was invested in the assisted living sub-market.

German investors in particular have been buying in recent months, which is perhaps also due to the limited travel opportunities for foreign buyers. The dynamic purchasing behavior will increase due to the high liquidity in the market. However, this is offset by limited product availability. This demand pressure on the part of investors is also reflected in the returns: The peak yields for nursing homes are currently around 4.3% and for assisted living at 3.5%. It can be assumed that the higher demand for risk-averse investment products, as well as rising construction and land costs, could further reduce returns. 

Recommendation: Use senior housing and care for urban and district development

The sector for housing and care for the elderly, which is set to grow strongly in the coming years, should be integrated into urban development policy and building culture in good time in view of locally available work capacities, the need for open space and first floor use or political commitment.


Note: The autumn report can be downloaded from the ZIA website (only in German language).

Contact person: Dr. Heike Piasecki, Head of Branch Munich and authorised signatory of bulwiengesa, piasecki [at]